China challenges India’s EV policies at WTO amid trade dispute

China has recently escalated the issue of its trade disagreement with India by asking the World Trade Organisation (WTO) to establish a dispute settlement case against New Delhi’s incentive schemes for cars, batteries, and EVs. The case came after a failure in bilateral consultations held on November 25, 2025, and January 6, 2026, which were intended to resolve this issue. China has thus formally requested the WTO, in a communication on January 16, to establish a panel and place the matter on the agenda of the next meeting in Geneva on January 27, 2026.

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China is of the view that conditions under India’s Production Linked Incentive (PLI) breach the global standards of trade, specifically the SCM (Subsidies and Countervailing Measures), GATT (General Agreement on Tariffs and Trade) 1994, and TRIMs (Trade-Related Investment Measures) by promoting localised trade and discriminating against foreign manufacturers.

The complaint of China encompasses several other Indian incentive schemes, including the PLI (Production Linked Incentive) scheme, the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, the PLI scheme for automobiles and auto components, and the policy to promote the manufacturing of EV cars in India.

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The challenge collides with China’s move to increase exports of certain products due to fierce price competition at home. India, on the other hand, with a fast-growing auto and EV market, is viewed as one of the most important opportunities for China to sell its final products.

According to data from the China Passenger Car Association (CPCA), “Chinese companies exported around 2.01 million pure electric and plug-in hybrid vehicles in the first eight months of the year, marking a 51 per cent year-on-year increase. However, Chinese EV exports are facing resistance in several regions, including the European Union, which has imposed tariffs of up to 27 per cent on Chinese-made EVs.”

China is India’s second-largest trading partner and has seen a significant rise in the trade deficit, with India’s exports to China declining by 14.5 per cent to USD 14.25 billion for 2024-25, and Indian imports from China increasing by 11.52 per cent to USD 113.45 billion, thereby resulting in a trade deficit of USD 99.2 billion.

The Indian government claims that its incentive policy is designed to reduce Indian import dependency and encourage Indian local manufacturing units, and it is not intended against any foreign country.  The ACC battery PLI scheme was approved in May 2021 with an outlay of INR 181 billion (USD 1.9 billion), and the PLI scheme regarding automobiles and auto components was worth INR 259.38 billion (USD 2.8 billion). WTo will be examining the issue in the months to come, which could significantly impact Indian manufacturing policy and electric vehicle imports.

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